Fairmint Urges SEC to Replace Legacy Systems With Blockchain-Based Solutions

Fairmint wants the SEC to adopt blockchain tools that can replace outdated systems in private equity markets.

The proposal supports real time oversight of investor self custody and smart contract settlement in private securities.

Fairmint suggests new rules that use knowledge instead of wealth to decide who can invest in private markets.

Fairmint has submitted a detailed policy proposal to the U.S. Securities and Exchange Commission (SEC) to modernize private equity markets. The submission targets regulatory gaps in how private securities are issued and managed. Fairmint’s proposal includes a blockchain-based framework that could improve oversight and reduce administrative burdens.

The company, which is a registered transfer agent, filed the plan with the SEC’s Crypto Task Force. The proposal outlines a shift from outdated spreadsheet-based systems to smart contract-based infrastructure. Fairmint highlighted issues in private equity, such as poor transparency and high operational costs due to legacy software.

Push for Unified Blockchain Standards

The seven-point proposal calls for standardizing infrastructure across transfer agents. It recommends protocol-level interoperability to replace fragmented systems. This change could allow systems to connect and communicate efficiently across firms and platforms.

Fairmint also proposed the introduction of blockchain-based observer nodes. These would give regulators real-time access to transaction data. Observability would be achieved without compromising user privacy. This method could help ensure compliance and reduce fraud.

Investor Access and Self-Custody Options

The framework supports investor self-custody of private securities. Fairmint recommends adding built-in compliance measures to secure these holdings. This would allow investors to hold assets directly while meeting regulatory requirements.

Another proposal aims to shift the accreditation process. Instead of wealth-based thresholds, Fairmint suggests using knowledge-based assessments. This change could expand access to private market investments.

Support for Smart Contract Brokers and DeFi Testing

Fairmint proposes a new broker-dealer structure. The model would use smart contracts to manage trades without requiring asset custody. This could simplify operations and lower intermediary costs.

The firm also calls for a supervised sandbox for decentralized finance. This environment would allow experimentation under regulatory oversight. The goal is to test DeFi systems safely within legal boundaries.

Smart Contracts for Faster Settlements

Fairmint recommends replacing traditional clearing systems with smart contract-based settlements. This would reduce delays and improve transparency. Transactions would settle directly without involving third-party clearinghouses.

The SEC’s Crypto Task Force has explored blockchain regulation in recent months. The task force held multiple roundtables on tokenization and DeFi. Fairmint’s proposal joins a broader push to reform how private securities are regulated in the United States. The private equity market reached $5.3 trillion in 2023. Analysts expect it to grow to $6 trillion by late 2024.